Nordex SE

Thank you very much for the introduction. Good afternoon, ladies and gentlemen.

Felix is speaking. I would like to welcome you on behalf of Nordex to our analyst and investor call for the full year 2019 figures.

Our CEO, José Luis Blanco; our CFO, Christoph Burkhard; and our CSO, Patxi Landa, will give a presentation sharing the latest developments about strategy, markets, products, guidance, financials and, not to forget, COVID-19 with you. After the presentation, we will open the floor for Q&A.

[Operator Instructions]. And now I would like to hand over to our CEO, José Luis.

Please go ahead.

Thank you very much, Felix. Good afternoon, everyone, from Hamburg.

Welcome to the 2019 analyst -- annual results call. Here with me is Christoph Burkhard, CFO; and in Spain is Patxi Landa, fully operational, but due to further restriction associated with COVID-19.

We have prepared for you today a standard agenda, with some special focus in COVID-19. We will start with introduction.

We will guide you through the evolution of the company in the different markets and in the others. Then Christoph will share with all of you the financial performance of the company.

We will discuss about operations and about technology. We will share with you the sustainability report.

We will have then a special short session about COVID-19 and what the challenges are for Nordex to finalize with the guidance for 2020. As Felix mentioned, we will have a Q&A.

And as always, we would like to conclude with the key takeaways from our side. So with this, let's start the presentation.

Just to summarize the recent developments, we would like to summarize in a sense that the Nordex Group, Nordex, we are making substantial progress in executing our strategy. Our strategy, as you remember, is to build a sustainable, global, top player of the wind industry.

First, we've been able to position the company as one of the most innovative global onshore players with a very good success in order intake. I will say that Nordex as per the Wood Mackenzie report is top 5 global company, including Chinese and Top 4 global order intake company, excluding Chinese in 2019.

Second is, on top of being among the top 4 global players in order intake is a leading company in the 4- to 5-megawatt segment. And this is a leading-edge product portfolio, where Nordex is behaving among the top 3 or top 2 of the sector.

We emphasize, as always, the resilient 20 -- close to 20 gigawatts of contracts under service. And not to forget the experience of a player with 30 years in the industry.

With this, I will move to the next slide, summarizing the execution of 2019. 2019, the summary or the headline, from our view, is that results were in line with the guidance, despite some, I would say, unexpected headwinds that we had during the year, driven by certain insolvencies of one of our competitor.

As a summary, sales stand now of €3.285 billion EBITDA margin, 3.8%. Very outstanding performance in working capital ratio of minus 9.1%.

Key points, stronger ever order intake of the company, 6.2 gigawatts. And this is a substantial increase, 31% compared to the previous year.

Very remarkable as well is that 44% of this 6.2 gigawatts order intake is coming from our latest turbine generation. And as you know and as we will see later on, this is a more profitable business segment, and the company is performing as a leading player in that segment.

As a consequence, the book-to-bill ratio stands at 1.53, finally, clearly, future growth in the future as you will see later in manufacturing and so on. The Delta4000 product portfolio with five different variants is covering all customer requirements.

And this is very relevant because the world -- the onshore world, is transitioning very quickly to the 4 to 5 megawatt segment. And last but not least, on October 18 -- 8, capital increase of €99 million through a private placement to anchor shareholder, Acciona, is strengthening the balance sheet and the confidence from key stakeholders in the Nordex strategy.

If we move to the next slide, I will hand over to Patxi to guide you through the development of the company in customers, markets and products. Patxi, please?

Thank you very much, José Luis. Good afternoon.

Looking at the market today, we see good demand for 2020 orders across the different markets. And this is supported by a number of factors, but notably the acceleration of private offtake agreements.

Demand in Europe continues to be strong with exception of Germany, but notably strong in the Nordics and in the east. As well in the U.S., we continue to see a high level of activity for 2020 orders and announced -- they announced an extension of the 60% PTC value to the end of 2024, supporting midterm demand in the market.

In LatAm, we also see good activity levels, notably in Brazil and Colombia. And as a consequence of this, we have a good visibility on the potential order pipeline for 2020, even better to the one we had same time, last year.

However, with the outbreak of COVID-19, we still need to evaluate the potential short-term effect on demand. Next slide, please.

As José Luis mentioned, in 2019, we had a record for the year with 6.2 gigawatts of new turbine orders, up 31% compared to the previous year. Thereof, orders in Q4 2019 were 1.5 gigawatts.

ASP for the year remained stable at €0.71 million per megawatt. All markets performed really well, but notably Europe, with close to 50% year-on-year increase and the U.S.

with more than double the orders over the previous year. Importantly, as well, Delta4000 relative share of orders continued to increase quarter-after-quarter during 2019, representing already 57% of the new orders in Q4 2019, and contributing to increase the average profitability of the backlog.

If we go to the next slide, please. Service sales grew 15% versus the previous year and represented over 12% of the total group sales in 2019.

Segment profitability continued its good and positive evolution, an increase to 17.7% EBIT margin for the year. If you go to the next slide, please.

And turning to the backlog, a brief reminder of the criteria we give ourselves for order recognition. So we continue to apply the same discipline, and we only recognize an order when it meets all and each and every one of the following criteria.

It needs to have a signed contract. All permits have to be in place, including grid connection.

Financing for the project has to be in place as well and the payment already received. So the existing backlog that we will see now is formed by projects that meet all this criteria.

If you go to the next slide, please. Turbine order backlog at the year-end stood at €5.5 billion, increasing 43% over December 2018.

Service order backlog stood at €2.5 billion for a combined order backlog of €8.1 billion. If we go to the next slide, please.

And looking at the backlog composition, the Delta4000 already constitutes the largest turbine type as you can see within the backlog. And in normal circumstances, it should grow to conform the majority of the backlog during this year already, increasing, as I mentioned before, the average profitability.

Continues to be very well balanced geographically. And very importantly as well, 3 quarters of it sit with large regional and global utilities and IPPs, confirming the very significant transformation in the customer base achieved by the company over the last few years.

And with this, I hand over to Christoph, who will lead you through the financials.

Thank you very much, Patxi. Good afternoon, ladies and gentlemen.

Welcome also from my side, and I would like to guide you now through our full year 2019 financials. The financial year 2019 went according to plan without any major surprise with the anticipated challenging back-end loaded pattern.

Despite those challenges, we were able to fulfill our guidance and to reach all financial targets. And with respect to our order intake, as just explained by Patxi and also working capital performance, we were able to exceed the targets we set ourselves the second year in a row.

Now starting with the sales number of €3.285 billion in 2019. This is an increase of €825 million and 34%, respectively, compared to 2018, which clearly shows that Nordex, as a global player, is back on the growth track, and has entirely overcome the negative effect of the declining German market.

Gross margin stood at 23.6% at year-end 2019. And we generated €124 million EBITDA, representing 3.8%.

The profitability level is still reflecting the challenging price levels of the projects signed during the peak of the price competition. EBIT improved by €35 million compared to financial year '18, while increased financing costs due to higher business activity were burdening the net result.

And for the sake of completeness, we have added the income statement for Q4 2018, which I'm showing now, which is not showing any unexpected deviation, but reflecting the significant back-ended volume increase as communicated previously. Now if we move with this to the balance sheet.

The solid structure of our balance sheet remains, in substance, unchanged compared to year-end 2018. The significant increase of the balance sheet versus 2018 is, of course, driven by the increased activity level compared to previous year.

And also equity increased in absolute amounts compared to 2018 due to the mentioned capital increase in October 2019, but the equity ratio went slightly down due to the overall balance sheet prolongation. With €510 million cash, we have, again, achieved a strong position at year-end 2019.

Albeit net debt in 2019 went slightly up compared to 2018 to €83 million. And with this, I would now like to comment on our working capital development.

The working capital ratio developed with minus 9.1% of sales, very positively at year-end 2019, and clearly exceeded our expectations. This performance was mainly achieved for the following reasons.

Firstly, the remarkable increase of our execution activities towards year-end led to a corresponding decrease of our inventories, which contributed to a reduction of €162 million in our working capital in Q4. Secondly, the positive development was further supported by reduced receivables due to increased cash collections and higher account payables, in line with the overall growth in Q4.

Overall, the result is a reflection of the cross-functional awareness of the importance of stringent working capital management within our organization globally. And we have been talking about it for, I think, now more than two years, and this is certainly also now a result of that.

With this, moving to the cash flow statement. The cash flow from operating activities was mainly impacted by the positive working capital development, being partially offset by the net loss and the phasing effect of VAT following the ramp-up and globalization of our supply chain.

We have been talking about that already during previous quarters, particularly also in Q3, and we have all measures in place to reverse that effect over this 2020. The cash flow from financing activities is mainly impacted by the capital increase in October 2019, and the repayment of the Schuldschein tranche in April, last year.

With this, going to the investments. Our total investment spend at year-end 2019 stood at €172 million, and this shows a jump of slightly more than 50% compared to 2018.

As outlined on the slide, the investments undertaken in 2019, amongst others, to support our global production ramp-up, specifically Mexico and Spain, steep increase in installation activities supported, of course, by all kinds of tools that we need and trends. Transformation of our global supply chain capacities, even more towards our Delta4000 platform, responding to the even faster and higher than assumed customer demand.

And last but not least, of course, also comprises further product development. With that, I want to move to the capital structure.

You do see the leverage curve in Q4 falling, again, steeply to 0.7, well below our long-term target level of 1.5 as indicated during our Q3 call. At that time, of course, we were looking at the 2.2, and I think many of you were wondering how will that pan out towards year-end.

And actually, we, again, managed to get to the level, which is our ambition level. We have already touched upon the equity ratio.

And here you can see again the impact of the capital increase as per October 2019. Now I would like to sum up the full year 2019 financial results of the Nordex Group with the following 3 takeaways.

Firstly, Nordex delivered in a challenging environment in 2019 as per the guidance and without any negative surprise. Secondly, Nordex managed successfully and extremely back-end loaded year, all challenges related to this pattern, and is fully back on the growth track after the temporary volume dip in 2018.

And this, of course, is confirmed also by our guidance, which we will talk about in a minute. Thirdly, with this being said, Nordex Group feels well prepared for a very intense 2020, showing further significant sales growth, driven by our record high order backlog and constant new order intake, generated by our successful Delta4000 platform.

But of course, that picture needs also to include a few on COVID-19, but we will do that in a minute. Thank you.

With this, to José Luis. Thank you very much.

Thank you very much, Christoph. If we analyze the operations side of the company, I think it's remarkable, the significant ramp-up in the operations activity during 2019.

As you remember, 2018 was a year to ramp down the operations to adapt to the lower volume after the substantial dip in sales in Europe and in Germany. '19, the company was back in the market and we needed to deliver substantial growth, which we did, as Christoph mentioned.

Substantial increase year-on-year, 23% on installation from 2.5 to 3 gigawatts. More important is the activity during the last quarter of the year, these installations of close to 1,000 turbines, 938, in 21 countries.

It's a good sign to prepare the company for future growth in 2020. And distribution is following sales, as mentioned by Patxi, 44% Europe; 29%, Latin America; 23%, North America; 4%, Rest of the World, Australia and India, South Africa.

In terms of production, it's even more remarkable because we have a lot of backlog to deliver, so we were able to increase assembly capacity by 100%. So we assembled 4.677 gigawatts of turbines.

1,388 units in the full year. 536 in Germany, 526 in Spain, 234 in India, 49 in Brazil for Brazilian market, 43 in Argentina, for Argentinian market.

We increased as well the in-house blade production, 69% to 1,366 sets produced. 600 in Spain, 465 in Germany, 234 in India and starting to see the ramp-up in Mexico, 60 -- 67 as well as developing an outsourced blade capability of 2,556 units in the last year.

So substantial ramp-up and preparing the company for -- even for future growth in 2020, and a great sign of flexibility. The company is adapting to the downturns and is adapting to the growth in a very flexible and fast fashion.

If we move to the next slide. It's just in those times of uncertainties, we like to give you a view about our global supply chain.

And our global supply chain in blades, as mentioned before, we do 35% of our blades in-house. Our production sites are in Germany, Mexico, Spain and India.

And third-party blade suppliers are in China, Turkey and Brazil. So we have a global network, necessary to ensure the best landed cost in all the regions that we operate.

In terms of nacelles, we have in-house nacelle facilities in Rostock, 2 sites in Spain, 1 in India, 1 in Brazil for the Brazilian market, India for the Indian market and mainly for the global market. As well we have subcontracted assembly capabilities in Argentina for the Argentina market as well as in China, where some subcontractors assemble subcomponents or models for us.

We have as well, in case needed, one of the biggest plants -- of the nacelle plants of the network in the U.S. And this is relevant because we are still living in a tariff conflict world.

In terms of towers, all steel towers are sourced externally. But very remarkable, the company has in-house capabilities to produce more than 700 concrete towers per year with a track record of more than 1,000 towers, and this is a substantial amount.

Most of our concrete tower facilities are in Mexico, in Argentina, in Chile, in Brazil, Spain, South Africa and India. So it's a quite global and diversified supply chain.

Global, flexible and scalable. With this, we move to the next slide, which is about products.

We talk a lot about Delta4000 and the success of this platform. What we are really doing is not just transforming the product portfolio, but transforming the company to operate in the future with a single platform concept.

We are slowly supporting our customers with, let's say, all products, but these whole products are very rapidly phasing out. And we are transforming the whole organization, engineering, supply chain and so on into a global single platform concept.

I think we were, and we will see in the next slide, that with this platform and the different variants that cover most of the needs of the future demand. Just to remind you, we were among the front runners in announcing our 4- to 4.5-megawatt platform in the marketplace.

We were among the front runners in prototyping this turbine back in '17. In '18, we launched a high wind version of this machine, a 4.8-megawatt turbine in April '18.

Last year, we launched 3 new variants of this product, a 5.X megawatt machine with substantial annual energy production increase. Orders were landed with that machine.

You remember in previous calls, as well as today, we announced a big order of this machine in Norway, 400 megawatt, very successful. May '19, we announced the launch of a bigger rotor for the platform, especially thought for megawatt constrained sites, where noise and land are not a big constraint, and we will expect to announce, very shortly, orders of this new variant.

As well, in August '19, we announced a new rotor, 163/5.X, which is very relevant for European markets, Germany, but not only Germany, all the European markets. So I will say that with this product portfolio, the company is well equipped for the years to come to have products that bring value to customers in all the geographies that we operate.

And you will see quarter-on-quarter, how the order intake is moving quickly to this product portfolio, which by the way, is more profitable for the Nordex Group. We would like -- today as well to share with you, the flexibility -- the sustainability strategy for Nordex.

Sustainability in different field of actions, we have issued the first audited report about sustainability and our sustainability strategy 2019-2021. And this goes from product responsibility to employees' responsibility to suppliers' responsibility to environmental and results efficiency sustainability to society responsibility.

In terms of products, our commitment is continuously developing cost of energy products, improving the footprint of those products, the carbon footprint as well giving customers high level of attention, and being the customer the center of our activities. Employees' responsibility, we are committed to improve continuously the loss injury rate, LTIF, and our commitment is less than 5 per million hours work.

In terms of leadership culture, strengthening the leadership culture and values. Continuous establishment of processes for employee development and promoting diversity in the company.

Supply chain adhering to standards in terms of cooperation and in tests of due diligence in all the -- our processes in the geographies where we operate. In terms of environmental sustainability, committed to reduce waste by 10% per unit of megawatt produce, reduce hazardous substance to -- that we use in certain areas of our production, improve the energy greenhouse emissions.

With the long term -- with the midterm target to procure 100% of the electricity from renewable energy sources, and improve end-to-end, all life cycle assessment of the products that we develop in order to improve the carbon footprint of our business, of our turbines. And social responsibility, supporting educational support and development in the geographies that we operate.

As examples and key facts in terms of product sustainability, the life cycle assessment of our Delta4000 product in a typical wind farm shows only 6.4 grams of CO2 per kilowatt hour of electricity generator. A single Nordex turbine covers the average channel electricity demand of 3,000 houses, 4-person houses in Germany.

And this compared to the 474 grams of CO2 that a kilowatt hour generated in a normal electricity mix shows the potential of wind energy to contribute to decarbonize the economy and society. So very much one Delta turbine at a medium wind speed site in Germany avoids 6.3 tons of CO2 per year.

Regarding employees, loss time injury frequency, lower to 4.6 in '19 from 5.6 in '18. In terms of diversity, 73 nationalities working for Nordex Group.

And in terms of environment, making progress towards 100% renewal procurement, 73.5% of the electricity was procured from renewable sources. With this, more towards the end of our presentation, we will like to share with you impact of COVID-19.

I would say COVID-19 is a moving target. It's too early to assess.

What we can share with you is, as in many other industries, it's the highest management focus in these current times. First priority, as always, is protecting the health and safety of Nordex employees.

This is the top priority for us, making sure that in the factories we work or in the projects we work or the turbines we serve in the field. But not only that, but as well in the office where we perform activities, these activities are performed in compliance with the law and in a safe manner.

We have set up a cross -- global cross-functional COVID-19 task force to monitor and assess and react quickly to the changes in the situation. We have implemented special health-related measures across our company to secure a safe operation.

We are focusing second, on top of health and safety, in securing and ensuring business continuity, at all possible options. And us in turbulent times, we need to have a stronger than ever focus in working capital and cash flow management.

What are the challenges that we are facing with this new situation? Basically, I mean, the flow of goods and the flow of people is somehow changing.

And this -- there are measures by authorities every single day, in every single country that are affecting our activity, and we need to replan in a continuous basis, the way we operate. We need to evaluate the impact on the business in an ongoing basis.

This might trigger possible delays in project execution and in installations. This might trigger impact for sourcing activities along the entire supply chain.

This might trigger as well, impact for our factories, if certain critical mass of workers is not achieved. And we could face delay in the ramp-up of enlarging our supply chain, as we mentioned before.

What we can share with you today, is that all of our manufacturing sites are operationally to -- as of today. We have parts.

We have the majority of our colleagues working. We have people affected as in any other company and country, and people in quarantine.

But as of today and the guidance that we are about to issue today is the best view that we have with information that we have as of today. So with this, we move to the next slide, which is what is our view for 2020, what is the guidance for 2020.

And again, this is subject to unforeseeable extent and duration of the measures taken globally to contain COVID-19. But with information we have today, we think that Nordex can deliver sales in the range between €4.2 billion to €4.8 billion, with an EBITDA between €160 million to €250 million.

Working capital ratio, we plan below 0. And we are planning a CapEx of €140 million.

That might need to be increased if there are supply chain restriction, but this is the view that we have today. So with -- this is what we have prepared for you today.

So with this, we will open the floor for Q&A.

Yes. Thank you very much for the presentation.

And I would like to hand over to the operator. The floor is open for Q&A.

Thank you.

Just on COVID first, just understanding the stress tests that you're implementing right now. I mean, just on working capital, your guidance pre-COVID implies a potential unwind of up to €300 million, if working capital balance comes back to 0.

I'm just wondering, what are you looking at in a potential stressed -- stress test environment? And ultimately, what measures do you have to protect cash in that scenario?

That's my first question.

Sean, this is Christoph. Yes, let me first start with the delta of €300 million that you are getting at.

I would like to put that in the context of how we have set our guidance over the previous years. And you have been seeing a constant adjustment downwards would certainly -- carried an element of conservatism, but also I think it was appropriate because there were uncertainties.

So we moved down from 7 to 5 to two. And now we say, clearly, we will want to be negative constantly.

That is the background to the guidance. With respect to stress scenario measures, it is -- I would like to point here to the cross-functional COVID team that we are having.

It is very important that we are reacting fast, once we do see new developments coming in, in order to prevent that we are building up too much working capital. And that's across the entire supply chain or the entire value chain, obviously.

And therefore, we do monitor very closely, project developments in order to counter steel on the outflow side and in order to counter steel on the inventory side and to have an integrated look at that. And we have a very, very strong receivable focus with respect, of course, to cash generation, and to be a little bit ahead of a potential wave.

We have in all our projects, that we are currently improving, the top priority on cash flow profile, and of a payment profile that is supporting those attempts that I've just outlined. Those are a few elements where we are tackling potential stress.

And of course, we are closely monitoring that in order to be prepared to -- particularly on the outflow side also then to react and to not come under more pressure on the inventory side.

Okay. That's clear.

Secondly, a question on component supply. Are there any specific components where you think supply is more constrained and where you see pinch points in -- across the supply chain for the wind industry this year?

I would say that basically, there are certain components that for the wind industry, China is the sourcing, metallic-al parts. Casting, forging situation in China is improving and factories are slowly coming back to normal activity.

Now the challenge are more in other geographies more than in China, it's bringing the components to factories, assembling the models, shipping the models to products -- to projects that are in different countries, and people going different countries to install and commissioning. So every disruption in the free flow of goods and now in people has a potential impact on our business.

And it's not as easy to quantify us as before, say, while China, if China doesn't produce castings, the wind industry has an issue. Now it's somehow -- their COVID public policies might impact our business in many different ways in different countries.

So the best we can do is to stay focused to have this high priority in the company. As Christoph mentioned and as I mentioned before, we have at our level, a COVID-19 task force with several cross-functional groups, operations, monitoring very quickly availability of component -- availability of components, monitoring on a daily basis, if our factories are operative or not?

How many people is affected? What are the measures?

How can we counteract? On the other side, we are monitoring very closely the project execution in the different countries, which projects might be affected by a lockdown in the country.

Of course, first priority is monitoring evolution in COVID-19 for our internal people. How many people is affected?

How many people needs to be put in quarantine because they were in contact with affected people? Key important thing is managing communication in these times of uncertainty.

And as Christoph mentioned, the fifth model is cash. It's what is the cash planning in the different scenarios that we are dealing on a daily basis.

So long history short, it's not that easy to say. I mean, it's several components coming from different countries, going to different countries, where different people from different nationalities to perform different activities to produce products, to send to other projects and countries.

Understood. Then -- a final question then.

On the higher profitability, I mean, you've been saying this now for some time, the Delta4000 is more profitable, and the proportion of order book now of Delta4000 continues to grow. Can you explain in what, particularly in a year pre-COVID guidance, you're seeing huge expansion.

What is holding back the underlying margin growth of the business?

Well, I will say you saw in the presentation from Patxi that we are still executing the majority of our volume of non-Delta4000 products. Second, the Delta4000 that we are executing are the launching customers and the launching products for that platform.

So as Sean -- as we deliver those all products and the new orders are moving from the order intake to the execution, this is what will bring the profitability improvement for the Nordex. Can we -- what is holding us to improve faster?

I mean, executing faster the ramp-up. Is that realistic in the current circumstances?

No. Not in 2020.

We could do more in 2021. But in 2020, it's not realistic that we can ramp up faster and do more supply chain development of the more profitable projects -- products and projects.

We can't hear anything.

It's Martin Wilkie from Citi. Just a couple of questions.

I mean, you mentioned about the supply chain and some comments that you had, components and so forth. You did mention on your slide that you do have some third-party sites in China for blades.

I mean, just specifically on China, which was, obviously, the sort of starting point for the COVID-19 crisis. I mean, was that a problem that's now been alleviated in terms of sourcing parts from China?

Or was that never a problem given the specific sourcing you got from China? Just to understand a little bit about whether that caused any issues for you at all over the last quarter or so?

No. No.

China has created some issues for that, but this is the past and everything is factored in the guidance. So the guidance is issued with the information we have today for the future.

And with the information we have today, I will say that China is not the biggest risk that we see. The factories are back in operation.

We have two blade suppliers in China producing blades for all products, for AWP products. Some projects were affected.

Customers were informed. And we are in negotiations with them to reschedule the schedules of those projects.

China is the origin for casted components and forging components for us. So far, we managed to have minimum impact in our factories due to lack of components from China.

And China is restarting now the activities. We do in China as well, subcontracted assembly models that is back in operation.

So to your question, yes, it did create issues. But things are back -- turning back to normality, I would say, as we speak.

That's very helpful. And then just a second question.

You mentioned about good demand for orders, I think, suggesting that tendering activity still remains high. But I'm guessing that any tendering you're doing today is for delivery in 2021.

So are your customers taking a view that they can still talk to you, negotiate with you, on the view that any sort of bottlenecks that may happen in the short run with labor movement will be alleviated? And if we still -- factor in that tender process is unchanged, if you like, from the current crisis?

I will say -- let -- Patxi, can you take this question, please?

Yes. I can take this one.

So far, that's what we see. I mean, the facts that we have in the table and I can share this with you today as we are approaching quarter-end is that the orders in the quarter -- in the current quarter will have already surpassed once in the first quarter of last year.

And I believe that they will end at around 20% up with respect to last year. And in a progression because January was a relatively poor start and February was better, and March was the better month of the quarter.

So this shows to the activity that we see. Again, the view that we have on the year, which, as you rightly say, is for orders that will materialize in installations, and in activity in 2021, is very strong.

And as a consequence of that is, at this point in time, is what we see. Needless to say, there will be -- some customers have -- may take a view, a more wait and see mode from an investment perspective, and we are starting a few of them having that view.

But all in all, as per today, what we see is that the view is that midterm, life goes on.

Okay. That's encouraging.

If I could -- my final question. You mentioned at the beginning, the PTC extension.

We've heard from different sources as to how important that 60% PTC extension could be. But it sounded like you potentially do see additional demand because of that -- some extension.

Just interesting to hear some more color on that, please?

But again, the fact is that the question mark was, last year, what is going to be the impact of a 20% loss of value from 100% full value PTC to 80%, which is the current status. I see that it has not materially affected volumes in the market.

And I do see U.S. with similar activity level as last year's, as a consequence, absorbing the impact.

What is going to happen with 60% remains to be seen. But we have seen already estimations that potentially the impact would be of around 4 gigawatts shared between 2023 and 2024 of additional demand versus the previous estimations.

I just double check, so you can hear me right now?

Yes.

So let's go. First one as a follow-up to Sean's questions around the guidance.

And when looking at the incremental sales and EBITDA, it seems that the contribution margin is sort of very much on par with what we did see in 2019, so around 4%, 5%. And I've been hearing you clearly on launch customers and still, obviously, the majority of the backlog for 2020 being based on the old products.

But can you just, nonetheless, give us a sense of how much of ramp-up costs, eventually high logistic cost is baked into that very guidance for 2020 EBITDA? And then I have the other two in a second.

Sebastian, José Luis speaking. We haven't quantified that.

We measure the profitability of orders based on contribution margin, and contribution margin of Delta4000 is substantially better than the -- all products. But the projects that we are delivering with Delta4000 this year, all of them, they are one-off costs, either it's a launching customer, launching a project, ramp-up cost in the different facilities.

So once the facilities start to produce at nominal pace, first, you are going to have substantial bigger share of best competitive country costs. You see today projects produced mainly with European blades shipped to -- even to U.S., a big portion during this year.

You won't see that next year. You -- we are ramping up, as we speak, for Delta4000, we have two production lines running nominalized speed in Rostock, ramping up two lines in Spain, ramping up two lines in Mexico, with an extension to another three ramping up for in Brazil and two in Turkey.

So the share of best competitive country, blades for the markets where we operate is change -- is going to change radically as long as these new facilities are operationally, but we haven't calculated in detail what is the sourcing effect of not being efficient and the ramp-up effect on the product composition. And what part is due to launching prices and launching customers.

This we haven't factored, but the early indicators that we have today is that the profitability of the projects in 2021 are better.

Okay. Now it sounds encouraging for '21.

And it's -- the second question is around the operations and then the capacity. And obviously, as Patxi just mentioned, the order backlog and pipeline is still calling for strong business activity in '21.

And he also mentioned before that the mothballed plant in the U.S. is one of the biggest in sale plans for the company.

Can you just help me understand what related capacity leeway is from this mothballed plant in the U.S.? And I think you mentioned on one of the previous calls that you have the ambition, at least, to take the overall run rate towards 6 gigawatts.

So is the U.S. a key cornerstone in here?

Or is that sort of...

No. No.

No. Not really.

I think this year, the plan is to ramp up the company to more than 6 gigawatts, I will say, in the range of 6.5 gigawatts, without taking into account the U.S. plant.

So there is even potential of the current nacelle plants to grow further than the a 6.5 gigawatts. With the U.S., of course, it's much more.

And the bottleneck is not nacelle assembly, it's components. It takes you 2 years to develop gear boxes for the 5-megawatt platform, and the bottleneck is as well, blades.

But if we successfully execute the ramp-up in blades, this year, we will have the possibility to sell more if customers are willing to buy more.

Okay. Interesting.

And then can you put a number behind the U.S. plant, just for the sake of completion?

It's easily -- I mean, we shared before in the presentation, the number of production in Germany, 500 turbines. 500 turbines are very easy to produce in the U.S.

But don't take that as an outlook, it's a possibility.

No. Okay.

That's helpful. And then the other last question is just around financing.

Christoph, can you just remind us of your financing headroom that you do have in place, obviously, we have seen this gross cash of around €500 million now at the end of 2019. I guess, you also have ample credit lines.

A question simply, how much of that is -- has been drawn down so far? And what should we know eventually about potential [indiscernible]?

Okay. Sebastian, if you talk about our credit line, then you are -- I guess you are talking about the guarantee line, I suppose.

Our guarantee line is, at the moment, the €1.21 billion is at the moment utilized around €1 billion, a little bit short of €1 billion. So there is not too much headroom left.

On the other hand, I think we have reached a pretty steady state risen now, you have been seeing our order intake has been on a constantly higher level already, anticipating the growth that you see in sales. So we would not see -- I mean, I don't know how successful it will be in the future, but the year has been already very successful.

So what I want to say is, we will -- we do not calculate with big jumps upwards even more for the time being with order intake. So we feel comfortable with that headroom that we have left.

And we have also been quite successful internally to incentivize sales also to put maximum focus on parent company guarantees in order to get a balance between bank guarantees and bank loans.

Okay. Sounds great.

And then sorry for a very last quick question on VAT. It has been, obviously, quite a headache for [indiscernible].

Can you just give us a sense what the burden was on the cash flow statement in 2019? And what you expect to revert in '20?

Yes. I'm going to be very open with VAT, and I was open already in Q3, and I continue to be.

I was in January -- only in January in India, with our Head of Taxes to look personally after that topic because it is -- I have to admit, it is really complex and tedious topic in certain countries. We have a burden of €93 million in trading effect, €93 million in 2019, which is a lot admittedly.

And we have to reverse that. And again, there are countries like Brazil, like Mexico, like India in our landscape that are really much more complex compared to Europe.

And I will also be open, we underestimated that back in 2017, '18. I guess, you need first to have the real-life experience.

But we are massively working on it, massively working on processes. You need just to do much more documentation work.

You need to be much more on the trigger compared to Europe. And I think that's all in a good way.

But it's a complex topic, yes.

I'm sorry, I'm not -- can you hear me now?

Yes.

Okay. Sorry, my headset seems to be -- yes.

Sorry, 3 quick questions. One about the prospects for the German market.

You mentioned it's nothing much happening in 2020. But what are your thoughts on the timing of a possible recovery in that market?

And secondly, a broader question regarding oil price collapse and any implications for demand in your sector? And thirdly, just some thoughts on the pricing of the 4- to 5- megawatt turbines.

I guess, they are -- they sort of are on the path of gliding prices. Where do you stand in terms of -- and in your outlook for the general price reductions in the market as a whole?

How does these -- how do your Delta4000s fit into that picture? How far do they take you in terms of following the downward slide in pricing in the industry as a whole, please?

Thank you. Patxi, can you take the questions, please?

I will. So with respect to the German market, first, German market represented during 2019 around 3% of our total orders.

So this to put the conversation in context, so we don't count on the German market, unfortunately, given the situation. And then when is the time with respect to recovery, we are slightly pessimistic, to be honest, because there were movements are needed to have happened that did not and as a consequence of that, I believe that we are not counting on a full recovery of the market in the year 2021.

And that is built in the business plan. So consequently, entry Germany for us is an upside.

So it's negligible at this point in time. And when it comes back, which I don't have a doubt that it will come back, it will be an upside for us.

Okay. With respect to demand of oil price collapse remains to be seen.

As you know, oil is not determining pricing in power markets, gas naturally -- natural gases. [indiscernible] we think it's going to be structural [indiscernible] and it's too early to judge at this point in time, the reaction, what is going to happen to a global electricity demand, specifically in specific markets.

I believe players need to form a view in that respect. And to my earlier comment, the players that are having the same information as we do speaking in March 2020, are taking investment decisions that are being -- that we collect as orders.

And as I said, the orders that we see this year are greater than last year. We will have to wait and see a little bit more on the impact of this into future demand than what it is really short-term or longer-term impact.

And with respect to pricing, so the industry has seen over the days where pricing was on a big decline. It's true that pricing is relatively complex topic, and we all, rightly so, discuss about the ASP as an indicator, which considers a number of factors and as a consequence of that, is not showing too much of a value, not to assess and understand pricing evolution.

But what I can share with you is that pricing stabilization is in the market and that I see that competitors, ourselves are very disciplined right now in that respect. And the scenario is very different to the one we were suffering 1.5 years ago.

Yes. And but I assume that the Delta4000 in terms of price per megawatt is -- fits into the pattern of generally declining over the years pricing environment?

That's right. From a pure CapEx perspective, mathematically, the greater the generator, the lesser the ASP.

But what you need to factor in is the numerous comments that we have done during the call with respect to the profitability of the Delta4000 with respects to legacy product, which is increasing.

Sorry, I've missed part of the call. I'm maybe asking something someone has already been asking.

With respect to the prepayments that you received, could you maybe give some more color on how they are geographically distributed and perhaps any trends in these geographies? I do seem to remember that prepayment morale from the U.S.

has been far higher...

Sorry to interrupt. You're very hard to understand.

We hear you very far away.

Yes. Is that better?

Yes. This is much better.

Thank you very much.

I'm sorry. I'm sorry.

I was talking about the prepayments that you received. And if you could give some color as to how they're geographically distributed, which geographies give you better or sort of worse prepayment terms?

I remember the U.S. were pretty good at it.

If you take the full year, they will follow the splits that we have been showing for order intakes, so 52% Europe, 28% North America. I believe it was 18%-or-so LatAm, and then the Rest of the World.

It's true that quarter-on-quarter, the dynamics of different market may alter those percentages. And the U.S.

is in the current state of business. Q2 generally is -- has a greater share of U.S.

deals. But other than that, they will follow relatively well the full year pattern.

If I may add to something to what Patxi just said, maybe more generally, to -- also to answer your question, I think we have been observing quite a harmonization of payment terms, if I may say so, over the globe, basically. If I compare that to the situation three years ago, where it was much more dependent on whether you would deal with a country, where you would have smaller -- a customer structure with smaller developers, et cetera, so we are -- I mean, if I look at -- if we look at projects being presented for approval, whether it's Latin America or U.S., also the payment terms are fairly, fairly similar, meanwhile.

Okay. And with respect to your order book, I mean, obviously, sort of oil has dropped away.

The world's depraved place these days. This question is also -- probably has also been asked already.

Is there any danger to any of your order book falling apart, effectively people, customers pulling orders, perhaps even asking you to repay some of the prepayments?

No. No.

The order book is filled with -- if you listened to the presentation, it was a tight criteria. So generally, those are projects that are fully permitted, so no risk on permitting side, fully financed on our risk on financing side with binding contracts, legally firm and binding contracts and on payments already received.

So in that context with finance in place, with permitting in place projects go ahead.

And the biggest share of the backlog is Europe, is U.S., is Chile, South Africa, Australia. That's a bigger share of the backlog.

So in relative terms, we have increased our European/North American weight into the backlog.

I've just one actually, and it's also related to the guarantee facility. I saw in the annual report that you extended the facility with your banks through April 2021, though it's not a new five year maturity or so.

Could you please explain what is driving this? And I mean, where the discussion with the banks ended?

And if the intermediate prolongation will be made on the same terms as the most recent facility?

Yes. We are coming to an end with our process here.

What I can tell you, we have been seeing some kind of extension of the timeline due to COVID-19 and the restriction of the people. We have many, many people now working from home offices.

That certainly slowed down some of the approval committees, but I'm optimistic that we will be able, very soon, to communicate the respective prolongation of the facility.

Okay. So in the second quarter or so that could happen then?

Is that realistic?

Absolutely. Absolutely.

Yes.

Okay. And the interim prolongation has taken place, that's on the same terms as the previous...

Absolutely. Yes.

Yes. Yes.

And what you see in our annual report actually, yes, it is already approved and implemented.

So most of my question have been asked. And maybe one question.

The new product share in sales is expected to increase in the next years. But today, your product business is EBIT negative.

When should we expect it to be profitable again? And what is your midterm margin target for this business?

I think we don't -- we are not in a position to guide you at this moment, 2021. But again, rated at -- that the Delta4000 is increasing quarter-on-quarter, the share on the order intake and is more profitable.

I mean, we haven't discussed numbers, but take it 3% to 5% better gross margin. And the typical sales to order is 12 to 18 months.

So the more you sell of the more profitable project, the more you improve your profitability in a 12 to 18 months horizon. But we cannot be precise in answering your question.

Sorry for that because we haven't done the analysis.

Maybe I can complement that is, if you see the backlog composition end of last year, 40% is composed by Delta4000, and the 60%, non-Delta4000. And when you see that there are 3/4 of it, have a maturity of 12 months or less, you can deduct that a significant amount of the non-Delta4000 backlog will go through the P&L during 2020.

The new orders share is going to be a majority Delta4000, and you can figure out what the potential composition of the backlog end of 2020 will be. And I expect the majority will be Delta4000 already with the profitability impact that José Luis was mentioning.

Thank you very much for your participation in the call. And if there are questions afterwards, my team and I are happy to take your questions.

And now I would like to hand over to our CEO, José Luis, for our final remarks. Thank you very much.

Thank you very much for your questions, for your participation. Thank you, Felix.

As a key takeaway of the session today, number one, we would like to mention that as expected, Nordex is executing our strategy to create a sustainable global top player of the wind industry. And as a reference point, the volume sales growth in 2020 are almost doubling the sales volume in 2019.

As well operations, operations are more than doubling. The number of megawatts that we are producing in 2020 versus 2019.

The second key takeaway from our side is that on top of positioning the company in our top 4, top 5 global, depending if you take into account China or not, Nordex is positioned globally in a top 2, top 3 in terms of order intake with the products of the future, with the products with 4 to 5 megawatt power. And the last takeaway, which is very relevant in current times, is that the business performance and the ramp-up in 2020 are subject to a lot of uncertainties due to COVID-19, not different uncertainties that our peers in the industry, not different uncertainties than the economy in general, but big uncertainties.

And the message is that the management and the senior executive of the company are fully focused in trying to mitigate as much as we can, the roadblocks that we find on the way, but it's fair to say that we see more risk than opportunities. Thank you very much for your participation and wish you a wonderful day.

Bye, bye.

Bye, bye.